New Delhi: At least 42 liquor shops in Delhi had been managed by solely three individuals, based on data seen by Hindustan Times, highlighting proxy possession that plagues the Capital’s liquor enterprise, and, based on consultants, results in cartelisation and suppression of State income.

HT reviewed related financial institution transaction data and interviewed trade and authorities operatives with information of developments to ascertain the widespread observe of proxy possession, which is a violation of excise guidelines.

Under the Capital’s 2010 excise coverage, a retail licensee is prohibited from opening multiple liquor store. Licensees flouting possession guidelines are liable to have their licence cancelled. Records present that many non-public vends are managed by a number of people or teams, who checklist completely different operators, addresses, and excise licence names, to bypass the foundations.

In a number of instances, nonetheless, the names of the authorised signatory wanted for wholesale purchases are the identical, present banking transactions.

“The extent and nature of cartelisation in retail liquor licences in Delhi has recently come to our notice and we will take strictest action possible. The new Delhi excise policy will effectively put an end to such cartelisation,” mentioned a senior Delhi authorities official.

The Delhi authorities’s proposed new excise coverage seeks to handle a number of points, together with proxy possession. Delhi has 849 liquor shops, of which 276 are privately run. Retail liquor licences are given by means of an software for a charge of eight lakh.

HT tracked transactions of 42 liquor shops within the metropolis in 2020 and early 2021. Payments made by these retail shops confirmed that the shops had been managed by solely three individuals.

Of these, funds for 23 vends had been made by one frequent authorised signatory — Rohit Arora — regardless of every of those shops being registered below completely different people or firms.

For instance, a liquor vend at Star City Mall in Mayur Vihar Phase 1 is registered below Bigway Export Private Limited, which cleared its funds by means of cheques with the signature of Rohit Arora, its proprietor.

But the identical individual additionally issued cheques for the liquor shops at D-Mall Netaji Subhash Place; RG City Centre Mall at North Delhi’s Lawrence Road; Rohini Sector 10; Karol Bagh; and Bawana, amongst others. All these are registered below completely different names and firms within the authorities data.

A senior excise division official admitted that the observe of proxy possession and flouting of the one licence-one store rule exists in Delhi.

“Some of them have their own manufacturing units in Punjab and other states. Those who own 20-30 stores arm twist the wholesalers to agree to their terms and conditions. They decide the wholesale buying price and seek huge discounts even as the retail price doesn’t decrease accordingly, thereby increasing their profit margins. They seek extra credit days, because of which wholesalers don’t get payments up to three months and engage in stock blocking as well. This is the current situation in Delhi,” mentioned the official, requesting anonymity.

Rohit Arora declined to remark. His cousin Prashant Arora, who’s a wholesale vendor of liquor, mentioned this observe was not less than twenty years previous. “If what liquor retailers are doing is illegal, why did the Delhi government’s excise department keep renewing all the licences? Why was no action taken?” he requested.

He admitted that Rohit Arora, whose identify was on the banking transactions, was his cousin however denied that he had damaged any guidelines by controlling a number of liquor vends. “What is being alleged as proxy ownership is the outcome of loopholes in the excise policy,” he mentioned.

As per present guidelines, it’s unlawful for a wholesaler of liquor to open a retail retailer. “No licence for retail sale of liquor for consumption off the premises and for consumption on the premises shall be granted to the holder of wholesale licence and vice versa,” states the 2010 coverage

Similarly, in 12 shops, the identify of businessman Nitin Verma was frequent in all banking transactions. In seven shops, Amit Arora, who runs the Buddy group, was talked about in banking transactions.

Verma didn’t touch upon the matter. Amit Arora denied the allegation and mentioned each licensee is a unique entity, a unique firm.

“I have no proxy ownership in any of my companies, any of my stores. The name of the companies might sound similar, but none of them have similar shareholdings. Proxy ownership is happening in those shops that have proprietorship. Here, a few individuals after a decade or so bought several licenses which were in the proprietorship model. But signatories continue to be in the first owner’s name. You have to understand the difference between proprietorship, partnership and private limited companies. Ours are proper private limited companies,” he mentioned.

But he couldn’t clarify how the identical identify saved recurring in a number of banking transactions.

A liquor trade govt mentioned the observe was widespread and the individuals named above had been amongst a bigger group of people who used loopholes within the present guidelines to broaden their enterprise community.

“For example, when you sell a store to someone else, the name on the licence remains that of the original owner. So there’s little way to check if a monopoly is being established,” mentioned this individual, who requested anonymity.

“The problem right now goes beyond just the issue of proxy ownership. It has rather evolved into cartelisation with a few retailers also getting into manufacturing cheaper variants,” alleged a second authorities official on situation of anonymity. “It negatively affects the customer’s experience as many of the renowned and top-selling labels remain ostensibly out of stock in the shelves of Delhi’s shops.”

Nearly 100 such retailers are run by three or 4 people, mentioned the official quoted above. The extent of proxy possession ranges from individuals working 5 retailers to as many as 30-odd, he added. “The 42 shops are just the tip of the iceberg.”

A 3rd official mentioned new suggestions to vary the excise coverage will scale back tax evasion and make sure the authorities doesn’t lose out on excise obligation.

“The 270-odd private liquor shops earn a gross profit of about 350 crore, but what the retailers actually declare is just about 70-80 crore. The proposed policy will put an end to this as only big players who can show their income tax returns for at least three years, have a turnover of 250 crore and can pay the earnest money deposit of 30 crore per zone, will be able to bid for the tender. It will ensure that white money is put in the business,” the official mentioned.

The new suggestions divide the Capital in 32 zones and finish the system of gathering licence charges individually for every retailer. Instead, an upfront licence charge is charged. Each zone could have not less than 27 liquor vends — all of which can go to at least one profitable bidder.

Experts mentioned the proxy possession was liable for cartelisation and “brand pushing”, the place customers should make do with inferior manufacturers pushed by the shop.

Anand Vijay Jha, senior vp (company affairs) of UBL (United Breweries Limited) mentioned the proposed Delhi excise coverage has some ahead trying provisions.

“We welcome the push towards more consumer choice and the harmonisation of the LDA [legal drinking age] with most of the country .The new ‘Brand Registration’ policy is another positive, however the implications on MRP and population based redistribution of existing outlets can only be determined in due course of time,” he mentioned.

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